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Michigan's Medicaid Waiver Puts CMS in Tight Spot

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Michigan's Medicaid Waiver Puts CMS in Tight Spot

By Rachana Pradhan

12/04/2015 10:59 AM EDT

The federal waiver Michigan needs in order for its Medicaid expansion to continue has put CMS in a seemingly impossible position of either approving controversial conditions or letting the program end next spring.

But several health experts told POLITICO they see paths for preserving Medicaid coverage for roughly 600,000 low-income Michigan adults.

CMS has let several states enact Medicaid expansion proposals with a conservative tilt, but Michigan presents the biggest test case for how far the Obama administration might go to preserve coverage. And with 20 states still not participating in expansion, the negotiations with Michigan could set a new precedent for what conditions CMS may approve to bring more states into the program.

The 2013 Michigan law expanding Medicaid included a provision requiring CMS to approve a waiver with drastically conservative changes by the end of this year. The waiver would require Medicaid enrollees earning above the poverty line to make a choice after four years of Medicaid coverage: Either enroll in a private subsidized plan on HealthCare.gov, or stay in Medicaid and pay up to 7 percent of household income toward health care costs - notably higher than the 5 percent ceiling CMS has held other states to.

Those changes would affect just over 100,000 expansion beneficiaries with incomes above the poverty line, according to state data. If the waiver isn't approved, Medicaid expansion coverage is scheduled to end in April under state law.

Several experts said the 7 percent cost-sharing limit likely presents the biggest sticking point between the state and CMS. But many in Michigan worry that if federal officials don't approve the provision, Republican Gov. Rick Snyder in order to save the program would have to turn to a state legislature more conservative than the one that barely approved expansion in 2013.

"To expect this legislature to reopen it and address it in a constructive, responsive, heartfelt way is just awfully difficult to envision," said Kim Sibilsky, CEO of the Michigan Primary Care Association. "If CMS comes out with anything but a straight 'yes,'...it's very clear what this legislature will do."

State and national health policy experts said the Michigan statute provides enough wiggle room for CMS and Snyder's administration to reach an agreement on cost-sharing requirements.Sibilsky and others said there might be ways to blunt the impact of the 7 percent ceiling so that only a small share of people would realistically have to pay that much toward their health care costs. Several organizationshave also pushed the state to allow hardship exemptions for beneficiaries struggling to afford increased cost-sharing requirements,according to the waiver proposal Michigan submitted to CMS.

The Michigan expansion law also offers enrollees an opportunity to lower their costs by participating in certain "healthy behavior" activities. Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation at the University of Michigan, said Michigan and CMS could agree to apply the provision liberally to make it easier for enrollees to reduce their cost burden.

Trish Riley, executive director of the National Academy for State Health Policy, also noted the Michigan law doesn't include an explicit trigger to disenroll someone from Medicaid for failing to pay, which could provide some comfort to federal officials. Such a "lock-out" period exists for some Medicaid expansion enrollees in Indiana's expansion model, which was approved by CMS in January.

"That's an important provision here," Riley said.

The other option for enrollees, if they don't want the added cost sharing, is to leave Medicaid after four years andenroll in exchange coverage with subsidies - but advocates complain this puts unprecedented time limits on Medicaid enrollment.

"Establishing a time limit of any kind is inconsistent with both the Medicaid statute and the Affordable Care Act and would set a dangerous precedent," several consumer groups wrote to CMS this fall.

Joan Alker, executive director of the Georgetown Center for Children and Families, said that Michigan can't expect to get everything it requested because waivers involve "give and take on both sides."

CMS declined to comment on the status of negotiations. A spokeswoman for Michigan's Department of Health and Human Services said discussions have been "productive," and the department is "cautiously optimistic" about receiving approval for a waiver that satisfies state law.

State Rep. Pam Faris, a Democrat, said Snyder administration officials have told lawmakers there's no back-up plan if CMS rejects the waiver.